Top Corporate Bond Funds: Returns, Options & Performance
Corporate Bond Funds are mutual funds that invest mainly in bonds issued by companies. As per SEBI rules, these funds must put at least 80% of their money in AA+ rated or higher corporate bonds. The aim is to provide steady returns by lending to strong and reliable companies. Since they invest in debt and not in shares, corporate bond funds are less risky than equity funds, but their returns are usually more stable and moderate.
Top Corporate Bond Funds Based on 5Y CAGR
Let’s look at the best corporate bond funds in India that you can consider investing according to 5-yr CAGR:
| Name | AUM (Rs. in cr.) | CAGR 3Y(%) | Expense Ratio(%) | CAGR 5Y(%) | NAV(₹ per unit) | Volatility |
|---|---|---|---|---|---|---|
| Nippon India Corp Bond Fund | 10041.62 | 8.38 | 0.36 | 7.1 | 63.95 | 1.2 |
| Axis Corp Bond Fund | 9588.47 | 8.36 | 0.36 | 6.95 | 18.38 | 1.13 |
| ICICI Pru Corp Bond Fund | 33452.55 | 8.12 | 0.35 | 6.88 | 31.78 | 0.86 |
| Franklin India Corp Debt Fund-A | 1071.46 | 8.35 | 0.25 | 6.87 | 109.82 | 1.76 |
| Aditya Birla SL Corp Bond Fund | 27803.16 | 8.03 | 0.32 | 6.69 | 116.28 | 1.26 |
| HDFC Corp Bond Fund | 35821.39 | 8.09 | 0.36 | 6.66 | 33.71 | 1.21 |
| PGIM India Corp Bond Fund | 89.65 | 7.9 | 0.25 | 6.65 | 48.81 | 1.19 |
| Kotak Corporate Bond Fund | 17810.61 | 8.1 | 0.34 | 6.63 | 4004.34 | 1.1 |
| UTI Corporate Bond Fund | 5760.75 | 7.94 | 0.26 | 6.45 | 17.02 | 1.14 |
| SBI Corp Bond Fund | 25301.38 | 7.99 | 0.36 | 6.39 | 16.22 | 1.17 |
Disclaimer: Please note that the above list of the best corporate bond funds is for educational purposes only, and is not recommendatory. Please do your own research or consult your financial advisor before investing. The data is derived from Tickertape Mutual Fund Screener and is subject to real-time updates.
Note: The data on the list of the top corporate bond funds is from 30th September, 2025. This data is derived from the Tickertape Mutual Funds Screener.
- 5Y CAGR: Sorted from Highest to Lowest
🚀 Pro Tip: You can use Tickertape’s Mutual Fund Screener to research and evaluate funds with over 50+ pre-loaded filters and parameters.
Overview of the Best Corporate Bond Funds
Nippon India Corp Bond Fund
Launched in 2009, the Nippon India Corp Bond Fund invests in high-rated corporate bonds. It generates regular income and long-term capital appreciation by building a diversified portfolio of bonds from companies with strong credit ratings. The fund selects bonds that balance safety with returns.
Axis Corp Bond Fund
Established in 2009, the Axis Corp Bond Fund invests primarily in corporate bonds. It aims to provide income and long-term capital growth by focusing on high-rated debt instruments. The fund selects bonds from companies with a proven record of financial stability and performance.
ICICI Pru Corp Bond Fund
Started in 2006, the ICICI Pru Corp Bond Fund invests in a diversified mix of high-rated corporate bonds. It generates regular income and moderate capital growth by investing in bonds from established companies that meet its credit quality standards.
Franklin India Corp Debt Fund-A
Launched in 2003, the Franklin India Corp Debt Fund-A invests in a wide range of debt securities, including corporate bonds. It provides income and potential capital appreciation by selecting corporate bonds based on credit quality and financial strength.
Aditya Birla SL Corp Bond Fund
Founded in 2003, the Aditya Birla SL Corp Bond Fund invests in a mix of debt instruments, focusing on corporate bonds. It provides stable income and potential capital growth by including bonds from financially sound companies across different sectors.
HDFC Corp Bond Fund
Established in 2001, the HDFC Corp Bond Fund invests mainly in corporate bonds. It generates stable income and moderate growth by selecting high-rated bonds. The fund maintains a diversified portfolio to manage risk effectively.
PGIM India Corp Bond Fund
Launched in 2004, the PGIM India Corp Bond Fund invests in a diversified portfolio of corporate bonds. It generates regular income and potential capital appreciation by choosing bonds from companies with strong financial health and credit ratings.
Kotak Corporate Bond Fund
Launched in 2011, the Kotak Corporate Bond Fund invests in high-quality corporate bonds. It ensures a steady income stream and aims for moderate capital growth by selecting bonds from creditworthy corporations.
UTI Corporate Bond Fund
Founded in 2003, the UTI Corporate Bond Fund invests in high-rated corporate bonds. It selects bonds from companies that meet its credit criteria and creates a balance between income generation and moderate capital growth.
SBI Corp Bond Fund
Established in 2003, the SBI Corp Bond Fund invests in debt instruments issued by Indian corporations. It focuses on high-rated corporate bonds to provide regular income with moderate risk, while maintaining a diversified portfolio.
What are Corporate Bond Funds?
Corporate bond funds are investment vehicles that pool money from investors to purchase a diversified portfolio of corporate bonds. Corporate bond funds may invest in bonds with varying credit ratings, from high-quality, investment-grade bonds to lower-quality, high-yield bonds, depending on the fund’s investment strategy.
Taxation on Corporate Bond Funds
When you invest in corporate bond funds, it’s important to know how they are taxed. The tax rules depend on the type of income you receive, like capital gains from selling the bonds or dividends. Here’s a simple overview of the key tax details for corporate bond funds:
| Tax Aspect | Details |
| Capital Gains Tax (on redemption) | Taxed at the investor’s slab rate, regardless of the holding period. No indexation benefit or LTCG classification for post 1st April, 2023 investments. |
| Dividend Tax (IDCW) | Taxed at the investor’s slab rate. |
| TDS on Dividends (Section 194K) | 10% TDS if total dividends exceed ₹10,000 in a financial year. If PAN is not provided, TDS is 20%. |
How to Invest in Corporate Bond Funds?
You can easily start to invest in the best corporate bond funds by following these steps:
- To invest in the top corporate bond funds, you can visit an equity investment platform such as smallcase
- The next step is to research and identify the best corporate bond mutual funds that match your investment thesis. Tools like the Tickertape Mutual Fund Screener can help you filter and compare funds based on parameters such as returns, expense ratio, and fund size.
- Once you shortlist the funds, visit smallcase, log in, and search for the fund by name. You can then choose the investment mode, either a one-time lump sum or a 5-year SIP plan, and complete the process.
Features of Corporate Bond Mutual Funds
- Flexibility: Corporate bond funds can be sold in the secondary market, enabling investors to sell their bonds before the maturity date.
- Diversification: These funds offer diversification by investing in a variety of corporate bonds issued by different companies across various sectors, which helps mitigate the risk associated with individual bond defaults.
- Tax Efficiency: Corp bond funds may offer tax advantages, particularly for investors in higher tax brackets. Interest income from corporate bonds held in the fund may be taxed at lower rates compared to other forms of investment income.
- Fixed Interest Payment: One of the biggest advantages of top-rated corporate bond funds is the fixed interest rates. These funds provide a stable source of income through regular interest payments from the bonds held in the portfolio.
Types of Corporate Bond Funds
- Investment-Grade Bonds: These are issued by financially stable and reliable companies with high credit ratings. They offer lower interest rates than high-yield bonds, but are also considered safer investments.
- High-Yield Bonds (Junk bonds): These are issued by companies with lower credit ratings. High-yield bonds offer higher interest rates than investment-grade bonds.
- Convertible Bonds: These bonds can be converted into shares of the company’s common stock at a predetermined price. It gives investors the potential to profit from the company’s stock price appreciation, but they also expose themselves to the risk of the company’s stock price decline.
- Callable Bonds: These bonds give the issuing corporation the right to repurchase the bonds before the maturity date, usually at a premium to the face value.
- Zero-Coupon Bonds: These bonds do not pay interest periodically; instead, they are sold at a discount on their face value.
Benefits of Investing in Corporate Bond Funds
- Diversification: Corporate bond funds invest in bonds from different companies and sectors. This reduces the risk because if one bond performs poorly, it won’t affect the entire fund significantly.
- Regular Income: Corporate bonds pay interest regularly, giving investors a steady income. The amount and frequency of these payments depend on the specific bonds in the fund.
- Accessibility: Corporate bond funds make it easier for individual investors to access a variety of bonds. Without these funds, it can be hard to invest in corporate bonds directly due to high minimum investments and the complexity of choosing the right bonds.
- Liquidity: Corporate bond funds are usually liquid, meaning they can be bought or sold easily. This gives investors more flexibility compared to individual bonds, which can be harder to sell before maturity.
Risks of Investing in Corporate Bond Funds
- Interest Rate Risk: When interest rates rise, the prices of existing bonds tend to fall, and vice versa. If the fund holds long-term bonds, its value may decrease significantly when interest rates increase.
- Credit Risk (Default Risk):If a company in the fund defaults, it could cause a significant loss in value for the fund, especially if it holds a large portion of bonds from that company.
- Sector or Concentration Risk: If a corporate bond fund has a significant portion of its investments in a specific sector or a few companies, it may face higher risks if those sectors or companies experience difficulties.
- Call Risk: Some corporate bonds are callable, meaning the issuer(the company) has the option to redeem the bond before its maturity date. If bonds are called early, investors may have to reinvest the proceeds at lower interest rates, which could result in lower corporate bond fund returns.
Factors to Consider Before Investing in Corporate Bond Mutual Funds
- Credit Quality of the Bonds in the Fund:Corporate bonds come with varying levels of credit risk, depending on the financial stability of the companies issuing them. That’s why it’s crucial to consider these factors while exploring corporate bond fund investment options.
- Interest Rate Environment: Corporate bond fund schemes are sensitive to changes in interest rates. That’s why it’s important to understand the interest rates and their impact before considering corporate bond mutual funds.
- Expense Ratio: The expense ratio reflects the annual management and operational costs of the fund. That’s why, when considering long-term corporate bond funds it’s essential to check the expense ratio factor, as a high ratio can make a big difference in the final returns over time.
- Inflation and Economic Conditions: Inflation can erode the purchasing power of bond income, while economic conditions can impact corporate profitability and, in turn, the ability of companies to meet their debt obligations.
- Fund’s Risk Profile: The risk profile of corporate bond fund schemes depends on the types of bonds they invest in, such as high-yield bonds, investment-grade bonds, or government bonds. That’s why investors should evaluate their risk tolerance before investing.
Who Could Consider Corporate Bond Mutual Funds?
- Regular Income-Seeking Investors: Corporate bond funds generate regular income through interest (coupon) payments. This can be appealing for people seeking reliable cash flow without the need to manage individual bonds.
- Diversification Seekers: Investors who already have exposure to equities and wish to diversify their portfolio by adding fixed-income assets, such as bonds.
- Investors Looking for Tax-Advantaged Income: Corporate bond funds may offer some tax efficiency, depending on the investor’s tax situation. Holding bonds in tax-deferred accounts like the National Pension Scheme (NPS) or other tax-saving instruments can help reduce the overall tax burden. However, corporate bond funds tax benefits vary by fund, so investors should review the specific tax advantages of each corporate bond fund.
To Wrap It Up…
In conclusion, corporate bond funds provide a way for investors to access fixed-income securities issued by corporations. However, investors should be aware of risks like interest rate risk, credit risk, and liquidity risk. It’s important to research and understand these risks before investing. The Tickertape Mutual Fund screener offers 50 pre-loaded filters, making the corporate bond funds comparison process easier, and investors can choose the best fund based on their investment thesis.
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Frequently Asked Questions(FAQs) on Corporate Bond Funds
Corporate bond mutual funds are investment funds that primarily invest in bonds issued by companies. These funds allow you to earn income through the interest paid on bonds, while also providing some level of diversification.
The best corporate bond funds depend on your financial goals. Factors such as the corporate bond fund performance, the types of bonds the fund invests in, and the fund’s overall strategy are important to consider. It’s always essential to compare different corporate bond fund schemes based on their past returns and risk profile.
Whether investing in a corporate bond mutual fund is a good option depends on your risk tolerance and income needs. These funds are usually less risky than equities and provide regular income, but they are subject to risks like interest rate changes.
Corporate bonds typically offer higher returns than Fixed Deposits (FDs), but they come with more risk. While corporate bond funds can provide more income potential, FDs are guaranteed and safer.
The interest payment frequency of corporate bonds depends on the bond terms. Some bonds may pay interest annually or semi-annually, while corporate bond mutual funds may distribute income on a monthly or quarterly basis.
Corporate bonds and stocks serve different purposes. Whether it is better than stocks or not depends on the goal of the investors, their investment strategy and their expectations from the investment.
The best time to invest in corporate bond funds depends on various market factors such as low interest rates, favourable market conditions, Credit environment, inflation, etc. These factors have a significant impact on the returns of corporate bond funds.
Corporate bonds carry risks like credit risk (the risk that the company may not pay interest or repay the principal) and interest rate risk (bond prices fall when interest rates rise). These factors can affect even the high-rated corporate bond funds.
The return on corporate bonds depends on various factors, such as the credit rating of the issuer, the bond’s maturity, interest rates, and market conditions. To identify the best-performing corporate bond funds, investors should analyse all these factors carefully. They can use Mutual Fund Screeners, which come with more than 50 filters, to help screen the best funds.
As of 30th September, 2025, based on the last 5-year returns, some of the high-rated corporate bond funds include:
– Nippon India Corp Bond Fund
– Axis Corp Bond Fund
– ICICI Pru Corp Bond Fund
– Franklin India Corp Debt Fund-A
– Aditya Birla SL Corp Bond Fund
Disclaimer: Please note that the above list is for educational purposes only, and is not recommendatory.
